Grubhub is merging with the Netherlands-based food-delivery company Just Eat Takeaway.com, ending its dalliance with Uber and creating a transatlantic service valued at $7.3 billion -- the largest entity of its kind outside of China.
“Uber approached Chicago-based Grubhub in May for an all-stock deal that fell apart this week. In a statement, Uber said the food delivery industry needs consolidation, but ‘that doesn’t mean we are interested in doing any deal, at any price, with any player,’” Reuters’ Toby Sterling and Greg Roumeliotis write.
“Media reports about the Uber offer prompted Just Eat Takeaway to reach out with its own offer, Grubhub CEO Matt Maloney told Reuters in a phone interview. Dutch-based Takeaway had acquired [U.K.-based] Just Eat in January for $7.8 billion,” they add.
The all-stock deal will give Grubhub shareholders 30% of the combined company, according to the release announcing the deal.
Manhattan-based investor rights law firm Halper Sadeh LLP quickly announced that it is investigating whether Eat Takeaway.com underpaid and if the transaction “is fair to Grubhub shareholders.”
The combined company “will be built around four of the world’s largest profit pools in online food delivery: the U.S., the United Kingdom, the Netherlands and Germany,” the companies stated.
“The deal sidelines Uber Technologies Inc., which had been in acquisition talks with Grubhub for months. Political pressure raised questions about whether U.S. regulators would approve such a deal. The two companies had nearly aligned on a price but remained at odds over other issues, including terms of a breakup fee for Grubhub if the deal couldn’t be completed, people familiar with the matter said last month,” Bloomberg’s Lizette Chapman, Liana Baker, and Natalia Drozdiak report.
“Shortly after talks between the two companies were made public in May, a handful of U.S. Senators alerted the country’s top antitrust officials asking for the potential deal to be scrutinized,” Sean O’Kane writes for The Verge.
Possible antitrust trouble was one reason Uber reportedly balked in recent days. Grubhub’s unsavory business practices -- like using misleading websites and phone numbers in order to charge burdensome, even predatory fees, or setting up websites for restaurants that aren’t even on its platform -- was another,” O’Kane adds.
“Grubhub’s deal with Just Eat is unlikely to garner as much regulatory attention as its possible combination with Uber. The proposed Uber-Grubhub deal would have combined two of the three largest food delivery companies in the U.S.,” write CNBC’s Alex Sherman and Lauren Feiner.
“The companies said they expect the deal to close in the first quarter of 2021. Grubhub CEO Matt Maloney will join Just Eat’s management board and lead the combined business in North America. Two Grubhub directors will join Just Eat’s supervisory board, according to the release,” Sherman and Feiner continue.
“Even before consolidation rumors, the New York City Council had been pushing delivery platforms to reform what they have deemed to be unfairly high commission rates and other questionable business practices in their jurisdiction. It now seems Grubhub’s largest market could soon become a lot less compelling: Last month, the council passed a temporary 20% cap on total fees platforms can charge restaurants for their service,” writes Laura Forman for The Wall Street Journal.
“It is also weighing a permanent 10% cap, which Small Business Committee Chairman Mark Gjonaj says he remains confident will be passed into law. Grubhub had been charging total fees of 35% in some cases, according to documents the council sent to the Journal.
“As of May 19, Second Measure data show Grubhub has recently lost ground to Uber Eats in New York City, but continues to have a strong market-share lead with 53% of sales to Uber Eats’s 23%. Grubhub didn’t respond to requests for comment,” Forman adds.
“Profits in the food delivery business have been elusive. Uber Eats, DoorDash and Grubhub have all spent millions of dollars on marketing and incentives to lure customers away from the others. Grubhub, which had been profitable, began losing money as it spent more to fight off rivals,” observe Kate Conger, Adam Satariano and Michael J. de la Merced for The New York Times.
But money has been made: Jitse Groen, the chief executive of Just Eat Takeaway, “founded Takeaway.com in 2000 when he was a student frustrated with the challenge of ordering pizza online. He took Takeaway.com public in 2016, and now has a net worth of more than $1.5 billion, according toForbes,” Conger, Satariano, and de la Merced add.